Long only 1/n portfolio#

import pandas as pd
pd.options.plotting.backend = "plotly"

import yfinance as yf

from cvx.simulator.builder import builder
from cvx.simulator.grid import resample_index
data = yf.download(tickers = "SPY AAPL GOOG MSFT",  # list of tickers
                   period = "10y",                   # time period
                   interval = "1d",                 # trading interval
                   prepost = False,                 # download pre/post market hours data?
                   repair = True)                   # repair obvious price errors e.g. 100x?
[                       0%                       ]
[**********************50%                       ]  2 of 4 completed
[**********************75%***********            ]  3 of 4 completed
[*********************100%***********************]  4 of 4 completed

prices = data["Adj Close"]
capital = 1e6
b = builder(prices=prices, initial_cash=capital)

for time, state in b:
    # each day we invest a quarter of the capital in the assets
    b[time[-1]] = 0.25 * state.nav / state.prices
portfolio = b.build()
portfolio.profit.cumsum().plot()
portfolio.nav.plot()

Rebalancing#

Usually we would not execute on a daily basis but rather rebalance every week, month or quarter. There are two approaches to deal with this problem in cvxsimulator.

  • Resample the existing daily portfolio (helpful to see effect of your hesitated trading)

  • Trade only on days that are within a predefined grid (most flexible if you have a rather irregular grid)

Resample an existing portfolio#

portfolio_resampled = portfolio.resample(rule="M")
frame = pd.DataFrame({"original": portfolio.nav, "monthly": portfolio_resampled.nav})
frame
original monthly
Date
2013-07-17 1.000000e+06 1.000000e+06
2013-07-18 9.979712e+05 9.979712e+05
2013-07-19 9.621811e+05 9.623698e+05
2013-07-22 9.718759e+05 9.717556e+05
2013-07-23 9.639049e+05 9.637599e+05
... ... ...
2023-07-11 7.743600e+06 7.728321e+06
2023-07-12 7.835525e+06 7.820110e+06
2023-07-13 7.976058e+06 7.960521e+06
2023-07-14 8.005296e+06 7.990038e+06
2023-07-17 8.011359e+06 7.995173e+06

2517 rows × 2 columns

print(portfolio_resampled.stocks)
                    AAPL          GOOG         MSFT          SPY
Date                                                            
2013-07-17  18736.925754  10927.529417  8394.131742  1788.326108
2013-07-18  18736.925754  10927.529417  8394.131742  1788.326108
2013-07-19  18736.925754  10927.529417  8394.131742  1788.326108
2013-07-22  18736.925754  10927.529417  8394.131742  1788.326108
2013-07-23  18736.925754  10927.529417  8394.131742  1788.326108
...                  ...           ...          ...          ...
2023-07-11  10225.578048  16323.945419  5822.701490  4434.563154
2023-07-12  10225.578048  16323.945419  5822.701490  4434.563154
2023-07-13  10225.578048  16323.945419  5822.701490  4434.563154
2023-07-14  10225.578048  16323.945419  5822.701490  4434.563154
2023-07-17  10225.578048  16323.945419  5822.701490  4434.563154

[2517 rows x 4 columns]
# almost hard to see that difference between the original and resampled portfolio
frame.plot()
# number of shares traded
portfolio_resampled.trades_stocks.iloc[1:].plot()

Trade only days in predefined grid#

b = builder(prices=prices, initial_cash=capital)

# define a grid
grid = resample_index(prices.index, rule="M")

for time, state in b:
    # each day we invest a quarter of the capital in the assets
    if time[-1] in grid:
        b[time[-1]] = 0.25 * state.nav / state.prices
    else:
        # forward fill an existing position
        b[time[-1]] = b[time[-2]]
        
portfolio = b.build()
portfolio.nav.plot()
# Trading only once a month can lead to days where 150k had to be reallocated
portfolio.turnover.iloc[1:].plot()

Why not resampling the prices?#

I don’t believe in bringing the prices to a monthly grid. This would render it hard to construct signals given the sparse grid. We stay on a daily grid and trade once a month.